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LIC’s Varishtha Pension Bima Yojana (VPBY) 2014 : Review

Government of India in the Union Budget 2014-2015, announced the revival of Varishtha Pension Bima Yojana. This Scheme is only available during the window from 15th August, 2014 to 14th August, 2015.

Key Features of the VPBY Scheme

1- Available to Indian citizens aged aged 60 years and above.
2- Pension would be on immediate annuity basis in monthly, quarterly, half-yearly or annual mode, varying, respectively, between Rs. 500 to 5000 (monthly), Rs. 1500 to 15,000 (quarterly), Rs. 3000 to Rs. 30,000 (half-yearly) and from Rs. 6,000 to Rs. 60,000 (annually), depending on the amount subscribed and the option exercised.
3- The payout implies an assured return of 9% on monthly payment basis, which amounts to an annualized return of 9.38%.
4- Loan (up to 75% of subscribed amount) can be availed after 3 years from the Date of Commencement.
5- On death, the full purchase price will be refunded to nominee.
6- Exit/surrender would be allowed after 15 years or earlier in special circumstances like critical / terminal illness of self or spouse.
7- Payment will be through ECS or NEFT

Eligibility

1- Available to Indian citizens aged aged 60 years and above.
2- Proof of age (school leaving certificate, driving license, passport) is required. If any of the standard methods of proving age is not available, then a self-declaration of one’s age can be made on a stamp paper before a notary.

Benefits

1- The scheme will provide return of 9% on monthly payment basis, which amounts to an annualized return of 9.38%.
2- Pension during the lifetime of the pensioner.
3- Pension will be paid on a monthly or quarterly or half yearly or yearly basis, as desired by the pensioner.
4- In the event of unfortunate demise of the pensioner, purchase price will be returned to the nominee/legal heir of the pensioner.
5- Loan facility available to the extent of 75% of purchase price after 3 years.

Disadvantages

1- Not the highest interest rates around.
2- Highly illiquid in case of emergency.
3- No tax benefits
4- Exit option available after 15 years.

Pension Amount and Premium

1- Minimum pension will be Rs 500 and maximum pension will be Rs 5,000 per month.
2- For a monthly pension of Rs 500, a one-time premium (payable in lump sum) of Rs 66,665/- will have to be made. For a monthly pension of Rs 5,000, a one-time premium of Rs. 6,66,665/-.
3- An investment of Rs 100,000 would give a pension of Rs 720 monthly.
4- Premium to be paid by cheque, demand draft or banker’s cheque payable on the branch of the bank which is member of the local clearing house.
5- Ceiling of maximum premium applies for family as a whole i.e. total amount of pension under all the policies issued to a family under this plan shall not exceed the maximum pension limit. The family for this purpose will comprises of pensioner, his/her spouse, minor children and dependents.

How to buy VPBY Scheme

If you are eligible, you can contact your LIC Agent or download Proposal Form. Submit filled application form with the premium at the LIC Office. Please note that premium to be paid by cheque, demand draft or banker’s cheque payable on the branch of the bank which is member of the local clearing house.